Professional indemnity insurance restrictions continue to harm industry

Professional indemnity insurance restrictions continue to harm industry

No easing of professional indemnity insurance restrictions, finds second CLC survey.

Limited availability of professional indemnity insurance (PII) and costly premiums are continuing to harm construction businesses and limiting the ability of firms to work on building safety remediation, according to the second annual survey from the Construction Leadership Council’s PII Group. The cross-industry survey revealed no real easing in the PII cover available to the profession since the group carried out its first survey a year ago. The 2022 survey, which received 652 responses, found that although high-rise residential work represents just 5% or less of workload for two thirds of firms, many are still suffering from increased premiums and excess levels, coupled with wide-ranging exclusions on cover. The CLC PII Group is particularly concerned that the situation is having a disproportionate effect on the ability of SMEs to take on work where cover for fire safety is required, to pay their premiums and to meet their claim excess in the event of a claim.

The results revealed:
• Nearly in one in five (17%) respondents are paying more than 5% of their turnover for their annual premium. One in twenty (5%) are paying more than 10% of their turnover for their premium, which is unsustainable for smaller businesses.
• Nearly a quarter (22%) of respondents are still unable to buy the cover they want or need (a slight improvement on 29% in 2021).
• Nearly seven out of ten respondents (68%) had restrictions on cover for fire safety (the same as 2021)
• A quarter (24%) have lost jobs as a result of inadequate PI insurance (compared with 31% in 2021).
• Three out of ten respondents (30%) have changed the nature of their work due to inadequate PII (compared with 29% in 2021).
• More than four in ten (42%) said that the experience of buying PII was significantly worse than their last renewal.
• A third (33%) of respondents have been declined insurance by three insurers or more, an improvement on 2021 (44%).
• Slightly more respondents have secured a claim excess that is 2% or less of their turnover (67% compared to 64% last year).
• Just over one in ten (12%) has an excess that is 21% of their turnover or more compared to 4% of respondents last year.
• There has been a slight improvement in the amount of cover available for “any one claim” rather than “in the aggregate” (64% compared to 60% last year).

Samantha Peat, managing director, Wren Managers and chair of the CLC PII Group, said:

“The market conditions for PII cover remain extremely tough for construction firms, particularly SMEs, and in the light of energy price rises and materials inflation, these are worrying times. The CLC PII Group will continue to work with Government and insurers to try and ease the situation.”

To download the full findings click here.

Members experiencing challenges secturing  insurance or with questiosn about level of cover should contact FIS on 0121 707 0077 or email and we can refer you to our specialist advisors.  

Industry mega-poll to track development of PI insurance crisis

Industry mega-poll to track development of PI insurance crisis

Companies from across the industry are being asked to take part again in what was, last year, the biggest ever review of construction’s growing professional indemnity insurance crisis.

The survey was carried out last year in response to firms from across the industry reporting sharp increases in premiums for PI insurance, while also seeing stricter curbs on the levels of cover.

Over 1,000 firms responded to the survey last year and findings included:
• Premiums had increased nearly four-fold at last renewal, having doubled the year before;
• Although most respondents said that less than 5% of their work related to high rise residential buildings, almost one in three were unable to buy the cover they wanted or needed; and
• Over 60% had some form of restriction on cover relating to cladding or fire safety and over a quarter of respondents said they had lost jobs as a result of inadequate PII, with one in three unable to carry out necessary cladding remedial work if they wanted to.

The Construction Leadership Council is seeking an even greater response this year to continue to provide government with data to support the construction industry’s request for help in this area, particularly among the SME sector and to address the slowing pace of necessary remedial work.

The survey is entirely confidential and companies from across the built environment are encouraged to participate at:

Construction Leadership Council Professional Indemnity Insurance Group lead Samantha Peat said: “The construction industry is heading into another difficult period with the cost of energy and building supplies increasing and our sense is that the problems around PII cover for cladding and fire safety are no better.”

“We are continuing to engage with the UK Government and insurers to find ways to help businesses that could otherwise face an uncertain future due to the nature of their PI renewals. We want businesses from across the industry to give us their views – whether you are affected or not – to help us shape the way we prepare a response from the whole sector.”

CLC chair Andy Mitchell said: “We have seen over the course of the pandemic that our industry can work together effectively to tackle the problems facing the construction sector. Given the feedback from across the sector about the difficulties faced by companies in obtaining PI insurance and the beneficial output from the previous survey’s responses, I strongly encourage companies to contribute to this year’s survey.”

The survey will be live until 29 April 2022. Industry-level details of the results will be published by the Council and will be used to inform ongoing work to support the sector.

Complete the survey here

The survey is entirely confidential and companies from across the built environment are encouraged to participate.

Cooperating to insure our future

Cooperating to insure our future

FIS has been listening to its members who have felt increasingly frustrated by the lack of real support from the insurance industry, as appetite has become restricted and where cover is available it is universally increased and, in some circumstances, it has become uncommercial and very difficult to place.

In a survey conducted by FIS at the start of the summer it was identified that around 90% of members have experienced rising insurance costs over the past three years.  Further that, over half of the respondents had experienced difficulty in securing insurance and 60% of respondents believe that the price of insurance is now a problem to their business.  Key concerns raised through our research were a need to switch to aggregate cover in order to get any insurance at all and having to deal with onerous endorsements within Professional Indemnity Insurance that prohibited certain key tasks, curtailing those jobs that our membership could take on.

This cannot continue; in reaction to these findings and further dialogue with our members, FIS has reviewed the options and is planning further intervention including setting up a new facility to broker insurance for members.  The aim is to establish FIS Insurance Services (FIiNIS) as ‘cooperative’ insurance brokerage and risk management advisory service.  The brokerage will be run in partnership with Construction Shield and will support FIS in advising on and of providing insurance-related services.

Commenting on the announcement FIS CEO Iain McIlwee stated:

“We keep coming back to the realisation that there is a fundamental breakdown in the way that we are engaging with the insurance sector.  This needs to start with a clearer understanding of the risks, interrogating claims data and looking to support an ongoing improvement in quality and risk management.  This isn’t just about cheaper cover, but about transparency and a new and holistic approach to risk management that will help us support individual members and sectoral change. 

 Through this open brokerage approach, built around the FIS PPP Quality Framework, our aim is to establish a new relationship with the insurance sector, separating legacy from future works and targeting better provision built around the needs and risks of our sector.  By doing this as a co-operative we can share the upside back with those companies that are effectively managing the risks.

In time it is an aspiration to look at the potential to evolve this co-operative approach to the natural progression of becoming an insurance mutual – we are a vast industry and taking a position in our own risk makes a lot of sense.”

Over the next few months, FIS Insurance partner Construction Shield will be reaching out to members, helping to analyse the cover they have and vitally don’t have with a view to offering tailored and targeted packages exclusively to companies signed up to the FIS Ongoing Vetting Process.

James Reid, Chief Executive at Construction Shield said:

We are delighted to be in partnership with the FIS on this project to help re-address the balance between genuine risk management and risk transfer.  It is clear that the FIS leadership have heard and reacted to the voice of its membership and it is for the membership to now join together strategically to put the buyers of insurance in a stronger and more stable bargaining position in a hardening ‘traditional’ insurance market.  With genuine risk management, the championing of best practise and greater understanding of activities there is no reason why insurers and insureds alike cannot come to a commercial sensible compromise between the availability of cover and the cost of proper risk transfer.  We, like FIS, are excited to be able to build this meaningful project together for the benefit of its membership.

CIVC Forum guide offers advice on professional indemnity insurance

CIVC Forum guide offers advice on professional indemnity insurance

The CICV Forum has unveiled a new guide to the crucial and increasingly complex issue of professional indemnity insurance (PII).

The easy-to-understand downloadable document, produced by the Forum’s unique collaboration of trade associations, professional bodies, companies and individuals, outlines the state of the insurance market, the precautions firms should take and the pitfalls they face.

And it warns that over the last 18 months or so, a variety of reasons have seen the cost of PII increase hugely while businesses have often suffered reductions in the scope of cover.

The free guide, which will be invaluable in a febrile market, offers advice on subjects ranging from extending liability to contractual liability, the nature of PII cover, insurance limits, obligations under ancillary documents and risk management.

Alan Wilson, CICV Forum Chair and Managing Director of electrical trade association SELECT, said:

“PII is a necessary tool for protecting business owners who provide a service or give advice if a client claims a service is inadequate.

“Until the past few years, the construction insurance market has been soft, in that there has been plenty of capacity leading to broad coverage and premium reductions driven by competing insurers.

“The market has now become very hard with the consequence that premium rates have increased, cover has been restricted and, indeed, several insurers have left the market altogether.”

The guide explains that market attitudes have changed following a number of incidents, including:

  • A review of unprofitable insurance classes by Lloyds of London
  • Advances in the size and complexity of the design and construction process
  • Over-eating, or businesses taking on higher levels of risk
  • The effects of the Grenfell tragedy, and
  • A series of natural disasters globally.

Len Bunton, construction consultant and co-Chair of the Forum’s Pipeline and Commercial Sub-Group, said:

“The issue of PII appears to be a potentially massive problem for the industry. This guide therefore outlines the nature and likelihood of liability and looks at how businesses can manage their risks by identifying them, evaluating their impact and taking steps to control them.

“It offers advice on negotiating with insurers and stresses that full disclosure of risk is vital, despite the onus placed on underwriters by the Insurance Act of 2015 to ask the relevant questions of a business.

“Demonstrating that you have a solid risk management culture, robust financial resources and controls, as well as providing insurers with proof and documentation of risk mitigation, internal practices, cashflow and profit margins, will all help lower premiums.”

Formed in March 2020, the Forum is now made up of 29 leading trade associations, professional services bodies and companies.

Since its inception, it has maintained a steady supply of information and practical advice to the sector as well as carrying out surveys, hosting webinars and holding regular discussions with the Scottish Government.

The Forum’s most recent event was a political hustings in April, during which Scottish Parliamentary candidates from the five main political parties debated the major issues facing today’s construction industry.

  • Download the document here.

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Cooperating to insure our future

Leading reform in insurance for construction

FIS has become acutely aware of the growing issues within our supply chain regarding requirement, availability, and escalating cost of insurance (particularly professional indemnity), but also overall concern regarding support for our sector from the insurance industry.  This has been widely reported across construction with the latest report from the Construction Leadership Council identifying that 55% of businesses responding had been unable to secure the level of cover that they wanted to buy.

FIS is exploring the possibility of developing a tailored, comprehensive, insurance solution aligned to the risk management principles identified in our FIS Product Process People Quality Framework that ultimately fairly prices risk and delivers value for money to our community.  Through this process FIS intends to challenge the market by interrogating claims history and policy wording with a view to supporting a more structured and informed dialogue, address some of the trust issues that have built up and ultimately look at how we best share risk with the insurance sector.

Insurance is the ultimate trust based sector – premiums go up when trust goes down.  Our remit from the Board is to challenge and, if necessary, disrupt and we are considering a number of potentially radical options, even the possibility of setting up a mutual insurance offering that ultimately would be owned by the industry.

We are not going to run before we can walk, but wanted to give you a bit of a heads up as to where this may go.  Key to supporting change is information – it is critical now that we build on the anecdotal information members have shared and use hard stats to challenge and, if necessary, to disrupt insurance provision for our sector.  So to this end please complete this short survey on insurance, even if you are perfectly happy with the support you are getting, we need a clear picture and the full range of views to understand scale and identify ground truths and ultimately support reform.

The survey is available here, should take no more than 5 minutes to complete and we are requesting responses by close of play on Thursday 27 May.

For more information on insurance, visit the FIS Business & Taxation Toolkit here

FIS Trends Survey shows cautious optimism

FIS Trends Survey shows cautious optimism

FIS latest quarterly trends survey shows that there is cautious optimism in the sector, but recovery is patchy.

The latest data gathered as part of the wider Construction Products Association quarterly trends survey shows that Overall 50% of respondents reported increased quarterly sales in Q1 2021, however workload remains constrained, with the balance reporting workloads slipping back on a quarterly basis.  The spread of the response is indicative of the patchy nature of recovery.  The market is, however becoming increasingly optimistic with a balance of 63% expecting increased sales in the next quarter and 26% anticipating this will convert into actual work.

Shortage is the watchword for 2021 in the finishes and interiors sector and this has manifested in inflation through the supply chain.  Over the past 12 months shortage in key materials hit the headlines (e.g. plaster and plasterboard) largely driven by COVID related production issues.  In 2021 whilst issues related to gypsum products has eased, more globalised issues related to steel, screws and fixings, timber and now polymeric products such as sealants are starting to drive allocation and extended lead times.  We have also seen shipping and transport costs impacted by Brexit, but this now seems to be easing.  Outside of these figures the rising cost of insurance and availability of cover has been raised as a concern.

FIS CEO, Iain McIlwee stated “I think if we knew 12 months ago we would expected to have seen far worse numbers, on the whole there are a lot of positives in there.  These figures are consistent with conversations we are having with members, there is work out there, but some sectors and regions are lighter than others and it is difficult to take a longer term view.  I take confidence from conversations with the Bank of England this week about long term investment patterns, but I am a little wary that the delays in work and decisions will leave a bit of an air bubble in the system and that cash, material and labour shortages will make things tricky for many in balancing things over the next 12 months”.

Iain McIlwee, FIS Chief Executive

Market Data

FIS members have access to a wealth of Market Data, from leading sources like the Construction Products Association and Barbour ABI. In addition, FIS also gathers data specifically related to the finishes and interiors sector.